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Press release from GlobeNewswire (a Nasdaq OMX company)

Oil States Announces Fourth Quarter Earnings

Tuesday, February 19, 2013

Oil States Announces Fourth Quarter Earnings13:16 EST Tuesday, February 19, 2013HOUSTON, Feb. 19, 2013 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the quarter ended December 31, 2012 of $98.5 million, or $1.78 per diluted share. These results compare to net income of $94.3 million, or $1.72 per diluted share, in the fourth quarter of 2011. The Company generated revenues of $1.1 billion and EBITDA of $222.7 million during the fourth quarter of 2012, compared to revenues of $995.8 million and EBITDA of $205.7 million in the fourth quarter of 2011 (EBITDA(A) is defined as net income plus interest, taxes, depreciation and amortization). Consolidated operating income and EBITDA increased by 2% and 8% year-over-year, respectively, due to organic growth investments made in the accommodations segment, increased sales of deepwater capital equipment and increased shipments of OCTG in the tubular services segment. Cindy B. Taylor, Oil States' President and Chief Executive Officer, stated, "Despite a softening global macroeconomic environment and reduced U.S. drilling and completion activity, our results for the fourth quarter of 2012 reflected solid revenue and earnings growth on a year-over-year basis." "Occupancy levels and RevPAR in our major Canadian lodges and Australian villages remained strong during the fourth quarter of 2012. We organically expanded our lodges and villages by over 2,400 rooms during 2012, a 14% growth rate. A significant portion of our lodge and village rooms are contracted on a multi-year, take-or-pay basis, affording us considerable revenue visibility." "Our offshore products segment reported record quarterly revenues and EBITDA in the fourth quarter of 2012. Backlog in our offshore products segment improved 5% year-over-year to $561 million at December 31, 2012, but declined $36 million from September 30, 2012 due to strong fourth quarter sales and a reduction in award activity in the fourth quarter of 2012. However, bidding and quoting activity remains strong, and the outlook for global offshore capital equipment demand is robust." "Our tubular services segment benefitted from strong shipments of OCTG in the fourth quarter largely due to an increase in deepwater Gulf of Mexico deliveries. Well site services' results were negatively impacted by the reduction in U.S. drilling activity and holiday downtime; however, pricing and demand for our proprietary rental equipment was essentially flat quarter-over-quarter." The Company recognized an effective tax rate of 29.7% in the fourth quarter of 2012 bringing the annualized effective tax rate for 2012 to 28.2%. This compares with an effective tax rate of 31.2% in the fourth quarter of 2011. The lower effective tax rate in the fourth quarter of 2012 was primarily due to higher U.S. state tax expense in the fourth quarter of 2011 and greater foreign earnings as a percentage of total earnings in 2012. Our foreign earnings are taxed at a lower rate than our domestic earnings. The Company invested $156.2 million in capital expenditures during the fourth quarter of 2012 primarily related to the ongoing expansion of its accommodations business in Australia, Canada and the U.S., the addition of proprietary rental equipment deployed to service the active U.S. shale plays and facility and equipment investments in its offshore products segment. During the fourth quarter of 2012, the Company repurchased $15.2 million, or 225,796 shares, of its common stock under its authorized share repurchase program at an average price of $67.52 per share. For the year ended December 31, 2012, the Company reported revenues of $4.4 billion, EBITDA of $923.1 million and net income of $448.6 million, or $8.10 per diluted share. The results for 2012 included (i) a pre-tax benefit of $17.9 million, or $0.23 per diluted share after-tax, related to a favorable contract settlement in its U.S. accommodations business recognized in the first quarter of 2012 and (ii) a pre-tax gain of $2.5 million, or $0.03 per diluted share after-tax, related to insurance proceeds received during the second quarter for the land drilling rig that was lost in a fire. For the year ended December 31, 2011, the Company reported revenues of $3.5 billion, EBITDA of $698.1 million and $322.5 million of net income, or $5.86 per diluted share. BUSINESS SEGMENT RESULTS (Unless otherwise noted, the following discussion compares the quarterly results from the fourth quarter of 2012 to the results from the fourth quarter of 2011.) Accommodations Accommodations generated revenues of $277.4 million and EBITDA of $119.5 million for the fourth quarter of 2012 compared to revenues and EBITDA of $236.9 million and $102.5 million, respectively, in the fourth quarter of 2011. Revenues and EBITDA both increased 17% year-over-year due to a 14% increase in average available rooms and a 9% year-over-year increase in RevPAR due to higher occupancy levels at the Company's major lodges. EBITDA margins remained strong at 43%. Since the majority of the Company's rooms are contracted under long term (three to five years), take-or-pay contracts with minimum occupancy requirements, the slowdown in metallurgical coal mining in Australia in the fourth quarter of 2012 had limited impact on our results as modest declines in occupancy were offset by contracted room additions. Well Site Services Well site services generated revenues of $172.4 million and EBITDA of $55.9 million in the fourth quarter of 2012 compared to revenues and EBITDA of $186.8 million and $58.6 million, respectively, in the fourth quarter of 2011. Revenues decreased 8% and EBITDA decreased 5% year-over-year primarily due to the overall reduction in natural gas drilling and completion activity in the U.S. However, EBITDA margins for the segment increased 100 basis points to 32% in the fourth quarter of 2012 compared to 31% in the fourth quarter of 2011. Our completion services business, formerly referred to as our "rental tools" business, generated strong margins despite declines in U.S. activity. Completion services' revenue per ticket in the fourth quarter of 2012 was up slightly; and activity, as measured by the number of service tickets issued, decreased 7% year-over-year due to reduced work available in the Haynesville, Barnett and Marcellus regions and was partially offset by increased activity in the Rockies region. Offshore Products Offshore products generated revenues and EBITDA of $237.3 million and $40.4 million in the fourth quarter of 2012 compared to revenues and EBITDA of $186.1 million and $37.5 million, respectively, in the fourth quarter of 2011. Revenues and EBITDA increased 27% and 8% year-over-year, respectively, primarily due to a revenue mix favoring our connector products and production equipment coupled with contributions from Piper Valves which was acquired in July 2012. Our EBITDA margin percentage decreased to 17% in the fourth quarter of 2012 compared to 20% in the fourth quarter of 2011 largely due to a mix of revenues which included greater conductor casing sales year-over-year coupled with negative inventory adjustments totaling $2.5 million. Backlog totaled $561 million at December 31, 2012 compared to $597 million reported at September 30, 2012 and $535 million reported at December 31, 2011. Major backlog additions during the quarter included connector product orders, production equipment and deck equipment orders. Tubular Services Tubular services generated revenues of $455.3 million and EBITDA of $19.0 million during the fourth quarter of 2012 compared to revenues and EBITDA of $386.0 million and $17.3 million, respectively, in the fourth quarter of 2011. Revenues improved 18% and EBITDA increased 10% year-over-year primarily due to the 13% year-over-year increase in the Company's OCTG shipments resulting from increased activity in the Gulf of Mexico coupled with certain market share gains onshore. Gross margin as a percent of revenues were 5.1% in the fourth quarter of 2012 down from the 5.6% margin reported in the fourth quarter of 2011 primarily due to lower margin sales into certain onshore markets as a result of declining OCTG prices throughout 2012. The Company ended the quarter with $450.2 million of OCTG inventories, down $73.5 million, or 14%, from September 30, 2012. The decrease in inventories was primarily due to deepwater Gulf of Mexico shipments made during the fourth quarter of 2012. Oil States International, Inc. is a diversified oilfield services company and is a leading integrated provider of remote site accommodations with prominent market positions in the Canadian oil sands and the Australian mining regions. Oil States is also a leading manufacturer of products for deepwater production facilities and subsea pipelines as well as a provider of completion-related rental tools, oil country tubular goods distribution and land drilling services to the oil and gas industry. Oil States is publicly traded on the New York Stock Exchange under the symbol OIS. For more information on the Company, please visit Oil States International's website at http://www.oilstatesintl.com. The Oil States International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6058 The foregoing contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included therein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2011 filed by Oil States with the SEC on February 17, 2012 and the "Risk Factors" section of the form 10-Q for the three months ended September 30, 2012 filed by Oil States with the SEC on November 2, 2012.   Oil States International, Inc. Unaudited Condensed Consolidated Statements of Income (in thousands, except per share amounts) (unaudited, unless otherwise noted)             Three Months Ended December 31, Twelve Months Ended December 31,   2012 2011 2012 2011          (audited)   Revenues  $1,142,336 $995,801 $4,413,088 $3,479,180  Costs and expenses:           Cost of sales and services   863,975  742,236  3,292,969  2,599,267  Selling, general and administrative expenses   55,750  50,532  203,651  182,434  Depreciation and amortization expense   65,775  50,828  230,098  188,147  Other operating expense /(income)   888  (915)  2,590  1,809  Operating income   155,948  153,120  683,780  507,523            Interest expense   (17,305)  (17,966)  (68,922)  (57,506)  Interest income   604  278  1,583  1,700  Equity in earnings (loss) of unconsolidated affiliates   (427)  (11)  243  (163)  Other income   1,681  1,998  10,211  3,515  Income before income taxes   140,501  137,419  626,895  455,069  Income tax expense   (41,710)  (42,890)  (177,047)  (131,647)  Net income   98,791  94,529  449,848  323,422  Less: Net income attributable to noncontrolling interest   272  247  1,239  969  Net income attributable to Oil States International, Inc.  $98,519 $94,282 $448,609 $322,453            Net income per share           Basic  $1.80 $1.84 $8.47 $6.30  Diluted  $1.78 $1.72 $8.10 $5.86            Weighted average number of common shares outstanding           Basic   54,794  51,222  52,959  51,163  Diluted   55,362  54,946  55,384  55,007    OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS(in thousands)   December 31,   2012  2011 ASSETS Current assets:     Cash and cash equivalents  $ 253,172  $ 71,721 Accounts receivable, net  832,785  732,240 Inventories, net  701,496  653,698 Prepaid expenses and other current assets   38,639   32,000 Total current assets  1,826,092  1,489,659       Property, plant and equipment, net  1,852,126  1,557,088 Goodwill, net  520,818  467,450 Other intangible assets, net  146,103  127,602 Other noncurrent assets   94,823   61,842 Total assets  $ 4,439,962  $ 3,703,641 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:     Accounts payable  $ 279,933  $ 252,209 Accrued liabilities  107,906  96,748 Income taxes  29,588  10,395 Current portion of long-term debt and capitalized leases   30,480  34,435 Deferred revenue  66,311  75,497 Other current liabilities   4,314   5,665 Total current liabilities  518,532  474,949       Long-term debt and capitalized leases (1)  1,279,805  1,142,505 Deferred income taxes  129,235  97,377 Other noncurrent liabilities   46,590   25,538 Total liabilities  1,974,162  1,740,369       Stockholders' equity:     Oil States International, Inc. stockholders' equity:     Common stock, $.01 par value, 200,000,000 shares authorized, 58,488,299 shares and 54,803,539 shares issued, respectively, and 54,695,473 shares and 51,288,750 shares outstanding, respectively   585 548 Additional paid-in capital  586,070  545,730 Retained earnings  1,899,195  1,450,586 Accumulated other comprehensive income  107,097  74,371 Common stock held in treasury at cost, 3,792,826 and 3,514,789 shares, respectively (128,542) (109,079) Total Oil States International, Inc. stockholders' equity   2,464,405   1,962,156 Noncontrolling interest   1,395   1,116 Total stockholders' equity   2,465,800   1,963,272 Total liabilities and stockholders' equity  $ 4,439,962  $ 3,703,641 (1) As of December 31, 2012, the Company had approximately $973 million available under its credit facilities.    OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)  Year Ended December 31,  2012  2011  Cash flows from operating activities:     Net income $ 449,848 $ 323,422 Adjustments to reconcile net income to net cash provided by operating activities:     Depreciation and amortization  230,098  188,147 Deferred income tax provision  17,370  27,075 Excess tax benefits from share-based payment arrangements  (8,164)  (8,583) Non-cash compensation charge  18,904  14,565 Gains on disposals of assets  (8,600)  (3,614) Accretion of debt discount  4,106  7,786 Amortization of deferred financing costs  7,301  6,497 Other, net  1,535  960 Changes in operating assets and liabilities, net of effect from acquired businesses:     Accounts receivable  (83,379)  (260,186) Inventories  (34,182)  (154,290) Accounts payable and accrued liabilities  30,697  47,610 Taxes payable  17,960  24,789 Other current assets and liabilities, net  (6,011)  1,735 Net cash flows provided by operating activities  637,483  215,913   Cash flows from investing activities:     Capital expenditures, including capitalized interest  (487,937)  (487,482) Acquisitions of businesses, net of cash acquired  (80,449)  (2,412) Proceeds from disposition of property, plant and equipment  14,653  5,949 Deposits held in escrow related to acquisitions of businesses  (20,000)  -- Other, net  (3,244)  (5,010) Net cash flows used in investing activities  (576,977)  (488,955)   Cash flows from financing activities:     Revolving credit repayments, net  (64,251)  (316,736) 6 1/2 % senior notes issued  --  600,000 Payment of principal on 2 3/8% Notes conversion  (174,990)  (10) 5 1/8 % senior notes issued  400,000  -- Term loan repayments  (30,047)  (14,972) Debt and capital lease repayments  (4,569)  (2,529) Issuance of common stock from share based payment arrangements  13,628  14,154 Purchase of treasury stock  (15,245)  (12,632) Excess tax benefits from share based payment arrangements  8,164  8,583 Payment of financing costs  (7,914)  (13,464) Tax withholdings related to net share settlements of restricted stock  (4,218)  (2,702) Other, net  --  (1,804) Net cash flows provided by financing activities  120,558  257,888   Effect of exchange rate changes on cash    680    (9,332) Net increase (decrease) in cash and cash equivalents from continuing operations continuing operations  181,744  (24,486) Net cash used in discontinued operations – operating activities  (293)  (143) Cash and cash equivalents, beginning of year  71,721  96,350       Cash and cash equivalents, end of year $ 253,172 $ 71,721         Oil States International, Inc. Segment Data (in thousands) (unaudited)             Three Months Ended December 31, Twelve Months Ended December 31,   2012 2011 2012 2011            Revenues           Completion services  $131,233 $140,535 $522,618 $487,941  Drilling services   41,177  46,250  191,034  165,903  Well site services   172,410  186,785  713,652  653,844  Accommodations   277,369  236,876  1,113,470  864,701  Offshore products   237,259  186,111  804,067  585,818  Tubular services   455,298  386,029  1,781,899  1,374,817  Total revenues  $1,142,336 $995,801 $4,413,088 $3,479,180            EBITDA (A)           Completion services  $43,679 $49,659 $176,755 $162,537  Drilling services (1)   12,194  8,944  57,839  40,686  Well site services   55,873  58,603  234,594  203,223  Accommodations (2)   119,476  102,516  505,894  361,156  Offshore products   40,428  37,505  149,377  107,376  Tubular services (3)   18,977  17,271  78,948  67,283  Corporate and eliminations   (12,049)  (10,207)  (45,720)  (40,985)  Total EBITDA  $222,705 $205,688 $923,093 $698,053            Operating income / (loss)           Completion services  $29,634 $38,416 $124,620 $120,849  Drilling services   6,400  3,816  32,160  20,394  Well site services   36,034  42,232  156,780  141,243  Accommodations (2)   77,265  70,525  364,629  248,977  Offshore products   36,935  34,292  134,051  94,666  Tubular services (3)   18,052  16,486  75,042  64,422  Corporate and eliminations   (12,338)  (10,415)  (46,722)  (41,785)  Total operating income  $155,948 $153,120 $683,780 $507,523 (1) The EBITDA of our drilling business for the twelve months ended December 31, 2012 includes a pre-tax gain of $2.5 million related to insurance proceeds received during the second quarter for the land drilling rig that was lost in a fire.      (2) The EBITDA and operating income of our accommodations segment for the twelve months ended December 31, 2012 includes a pre-tax benefit of $17.9 million related to a favorable contract settlement in its U.S. accommodations business recognized in the first quarter of 2012. (3) The EBITDA and operating income of our tubular services segment for the twelve months ended December 31, 2012 includes $7.5 million of out-of-period adjustments related to corrections of accruals for customer credits and related returned inventory recognized in the third quarter of 2012.   Oil States International, Inc. Additional Quarterly Segment and Operating Data (unaudited)         Three Months Ended December 31,   2012 2011        Supplemental operating data             Lodge/village revenues ($ in thousands)  $212,921 $171,355  Other accommodations revenues ($ in thousands)   64,448  65,521  Total accommodations revenues ($ in thousands)  $277,369 $236,876        Average available lodge/village rooms   19,378  17,069  Lodge/village revenues per available room  $119 $109        Offshore products backlog ($ in millions)  $560.8 $535.2        Rental tool job tickets   11,959  12,858  Average revenue per ticket ($ in thousands)  $11.0 $10.9        Tubular services operating data       Shipments (tons in thousands)  213.8 189.0  Quarter end inventory ($ in thousands)  $450,244 $420,519        Land drilling operating statistics       Average rigs available  33 34  Utilization  79.2% 86.4%  Implied day rate ($ in thousands per day)  $17.1 $17.1  Implied daily cash margin ($ in thousands per day)  $5.3 $3.6 (A) The term EBITDA consists of net income plus interest, taxes, depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding our ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The following table sets forth a reconciliation of EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles. Oil States International, Inc. Reconciliation of GAAP to Non-GAAP Financial Information (in thousands) (unaudited)             Three Months Ended December 31, Twelve Months Ended December 31,   2012 2011 2012 2011            Net income / (loss)  $98,519 $94,282 $448,609 $322,453  Income tax provision   41,710  42,890  177,047  131,647  Depreciation and amortization   65,775  50,828  230,098  188,147  Interest income   (604)  (278)  (1,583)  (1,700)  Interest expense   17,305  17,966  68,922  57,506  EBITDA  $222,705 $205,688 $923,093 $698,053CONTACT: Bradley J. Dodson Oil States International, Inc. 713-652-0582